Microeconomics and Macroeconomic Issues

1. Analyze whether each of the following is primarily a microeconomics or a macroeconomic issue:

• Setting the price for a cup of coffee.
• Measuring the impact of tax policies on total household spending in the economy
• A household’s decision regarding whether or not to go on vacation
• A worker’s decision regarding which job to accept
• Designing government policies to address issues with the social security program

2. Explain why each of the following is either a positive or normative economic statement.

• A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10 percent.
• The federal government should spend more on diabetes research.
• Rising paper prices will increase book prices.
• The price of bagels at Bruegger’s is too high.

3. Identify the effect of each of the following on the United States Production Possibilities Frontier (PPF). Does it shift inward, outward, or not at all?

• A decrease in the average length of annual vacations
• An increase in immigration of foreign workers to the U.S.
• An increase in the average retirement age
• The migration of skilled workers to Europe

4. Identify whether each of the following would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home). Briefly explain your answers.

• Higher unemployment rates.
• Lower average wages.
• Higher demand for labor.
• Lower income tax rates on wages earned.

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